Jeremy Mateo, 27, is a real estate broker in Hawaii and bought his first home, a one-bedroom condo for $ 560,000 in Honolulu, just before the coronavirus pandemic turned life in the United States upside down

Since Mateo closed his house in March 2020, the real estate market has been in turmoil. At first, the pandemic shut down the entire market. By the summer, he says buyer demand soared after the Federal Reserve announced it would keep benchmark interest rates close to zero until 2022 and mortgage rates are dropped to all-time lows, “and that’s when all real estate started going crazy here in Hawaii.”

Buying a home anytime is a big decision, and right now many housing markets nationwide are extremely competitive, causing house prices to soar.

So, for those who are considering buying a home, whether it’s in the next few months or years, Mateo shared with CNBC Make It the top three things first-time homebuyers should be prepared for.

First, the basics: According to Mateo, buyers need to make sure they have a good credit rating in order to qualify for a home loan at a great interest rate. Generally, the higher your credit score, the lower your mortgage interest rate. A lower interest rate can mean considerably lower monthly payments.

A A strong credit history can also improve your chances of winning a bidding war or getting mortgage pre-approved.

But it can take time to build credit or improve a low score, which takes into account your payment history, amounts owed, length of credit history, new credit, and credit composition.

That said, financial experts point out that mortgage rates should stay low for the next two to three years if you need time to improve your financial situation.

It can take years to save for a down payment on a home, but that’s not the only number to think about.

For example, Mateo put 10% on his house, or $ 56,000 to pay up front, and pays $ 185 more for private mortgage insurance each month. (Financial experts recommend saving at least 20% of the home’s value for the down payment to avoid a recurring PMI.)

Closing costs, which can include home inspection fees, loan application and setup fees, and even two months of property taxes, can ranging from about 2% to 5% of the loan amount, and they are due at the time of purchase. As a real estate agent, Mateo was paid a commission to cover his closing costs, but without it it would have been an additional $ 7,800 on the day of signing.

Most buyers should also consider recurring expenses such as home insurance, property taxes, repairs and maintenance. These can add up to 1% to 2% of the purchase price each year. For example, Mateo’s mortgage and PMI are $ 2,833. He pays an additional $ 1,010 per month in homeowners association fees, maintenance fees, taxes and insurance, bringing his total housing expenses to about $ 3,843 per month.

Then, after Mateo bought his house, he revised his original budget for renovations and furnishings and ended up spending around $ 100,000 to make his place feel like home.

With up-front costs and moving-in costs in mind, Mateo says it’s crucial to overestimate your savings when buying a home: “If you think you have a number in mind to save, save more than that, because you never know what the unforeseen costs you. could have.”